Abstract:
Capital structure choice poses a lot of challenges to firms. Determining a suitable mix of equity and debt
is one of the most strategic decisions non-financial companies are confronted with. A wrong financing conclusion
has the tendency of stalling the fortunes of any business. Therefore, if managers are to achieve the goal of capital
maximization, conscious steps must be taken in the right direction and at the right time to identify those factors
that must be taken into knowledge in determining appropriate financing mix. It is upon this premise that the
objective of this study is to find the determinants of capital structure of non- financial listed companies listed in
the Colombo Stock Exchange (CSE). In this study financial cost and profitability are the independent variables
and capital structure is the dependent variable. Capital structure is measured with the total debt ratio. Further, the
financial cost is measured with the proxy of financial expenses and profitability is measured with the proxy of
return on assets. Data were collected from the Annual Reports of 215 listed companies for a period of 5 years
from 2012 to 2016. Employing multiple regression analysis, this study found that there is a positive relationship
between financial cost and capital structure while there is a significant negative relationship between profitability
and capital structure of non-financial listed companies of CSE during the study period.
